The present disclosure is generally directed to computer-implemented risk analysis, and more specifically to computer-implemented optimization of financial risk mitigation.
Banks and other types of financial institutions must deal with many exposure issues, such as complicated loan issues. Often exposures are secured by different forms of security, which can be considered a type of financial risk mitigation. Regulations often require that financial institutions have capital on hand to account for any unsecured portion and secured portions of exposures, where the capital charge for a secured portion is based on the riskiness of the mitigation, as well as any discounts that may be applied to the mitigation when the mitigation is used to secure the exposure. Moreover, these same regulations can require that financial institutions have capital on hand to account for a portion of the financial risk mitigations, based on the riskiness of the mitigation, as well as any discounts that may be applied to the mitigations. One example of such a regulation is Basel II. While it may specify risk weightings for mitigations and unsecured exposures according to their respective financial qualities, Basel II does not specify any effective mechanism for addressing complicated mitigation and exposure issues.